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Why South Korea Just Ramped Up Iranian Oil Imports

oil terminal

South Korea’s imports of Iranian crude last month reached 1.2 million tons, or 8.8 million barrels which was a 23-percent increase on February and a fivefold increase in January, when Korean refiners resumed their purchases of Iranian crude.

Reuters reports the daily intake rate for March was a bit above 280,000 barrels, which on an annual basis represents a 12-percent decline. This is understandable as this time last year the U.S. and not yet reinstated sanctions against Tehran and everyone was buying its oil without concern.

Now, however, South Korea and Japan are being extra careful: both countries suspended their purchases of Iranian crude ahead of the return of sanctions last November and then waited for two months before they resumed their buying of Iranian oil even though they were granted a sanction waiver.

The waivers, also granted to India and China, among others, expire in May, and South Korea and Japan are already negotiating a waiver extension despite Washington’s stated goal of reducing Iran’s oil exports to zero. According to the latest updates from U.S. officials, the administration will seek to achieve this goal gradually to avoid a shock to the market that would cause a jump in prices.

When the current waivers expire, sources told Reuters, the next intermediate goal will be to cut Iran’s exports to below 1 million bpd, or by 20 percent from the estimated May rate.

South Korea was allowed under the sanction waiver to continue importing 200,000 bpd until May. If it scores a waiver extension, this amount will probably be reduced.

Earlier this month, the U.S. special envoy for Iran, Brian Hook, told Reuters that three of Iran’s biggest oil importers had stopped buying crude in April ahead of the sanction waiver expiration, although he did not name any of the three. This suspension explains the increased rate of Iranian oil intake in March, with both Korean and Japanese refiners buying as much as they can before the waiver expires without compromising their countries’ good standing with Washington.

By Irina Slav for Oilprice.com

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